Strategic Planning
Strategic planning is an organisation's process of defining its strategy and making decisions on allocating its resources to pursue this strategy, including its capital and people.
The outcome is normally a strategic plan which is used as guidance to define functional and divisional plans, including Technology, Marketing, etc.
Methodologies
There are many approaches to strategic planning but typically a three-step process may be used:
- Situation - evaluate the current situation and how it came about.
- Target - define goals and/or objectives (sometimes called ideal state)
- Path - map a possible route to the goals/objectives
One alternative approach is called Draw-See-Think
- Draw - what is the ideal image or the desired end state?
- See - what is today's situation? What is the gap from ideal and why?
- Think - what specific actions must be taken to close the gap between today's situation and the ideal state?
- Plan - what resources are required to execute the activities?
In other terms strategic planning can be as follows:
- Vision - Define the vision and set a mission statement with hierarchy of goals
- SWOT - According to the desired goals conduct analysis
- Formulate - Formulate actions and processes to be taken to attain these goals
- Implement - Implementation of the agreed upon processes
- Control - Monitor and get feedback from implemented processes to fully control the operation
Situational analysis
When developing strategies, analysis of the organisation and its environment as it is at the moment and how it may develop in the future, is important. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the new strategy.
Analysis of the external environment normally focuses on the customer. Management should be visionary in formulating customer strategy, and should do so by thinking about market environment shifts, how these could impact customer sets, and whether those customer sets are the ones the company wishes to serve.
Analysis of the competitive environment is also performed, many times based on the framework suggested by Michael Porter.
Goals, objectives and targets
Strategic planning is a very important business activity. It is practiced widely informally and formally. Strategic planning and decision processes should end with objectives and a roadmap of ways to achieve those objectives.
The following terms have been used in Strategic Planning: desired end states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and fail to achieve clarity.
The following concept has been found useful. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc.
From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?"
The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined.
Differences between a current situation and a future aspirational state can appear as a deficiency or as a gap. Objectives and goal management serve to eliminate this gap. Some writers distinguish between goals (inexactly formulated aims that lack specificity) and objectives (aims formulated exactly and quantitatively as to time-frames and magnitude of effect). For example, a gambler might have the ambiguous goal: "I want to get lucky tonight". Converting this into an objective, it might become: "I want to make $100 at the blackjack table by 8 o'clock tonight." Not all authors make this distinction, preferring to use the two terms interchangeably.
People typically have several goals at the same time. "Goal congruency" refers to how well the goals combine with each other. Does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other goal(s).
One approach recommends having short-term goals, medium-term goals, and long-term goals. In this model, one can expect to attain short-term goals fairly easily: they stand just slightly above one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to attain. Strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs) in this context.) Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts by attaining the easy short-term goals, then steps up to the medium-term, then to the long-term goals. Goal sequencing can create a "goal stairway".In an organizational setting, the organization may co-ordinate goals so that they do not conflict with each other. The goals of one part of the organization should mesh compatibly with those of other parts of the organization.
Mission statements and vision statements
Organizations sometimes summarize goals and objectives into a mission statement and / or a vision statement:
- A Definition of Vision in a dictionary: 'An Image of the future we seek to create'.
A vision statement describes in graphic terms where the goal-setters want to see themselves in the future. It may describe how they see events unfolding over 10 or 20 years if everything goes exactly as hoped.
- A definition of
Many people mistake vision statement for mission statement. The Vision describes a future identity and the
For example, "We help transport goods and people efficiently and cost effectively without damaging environment" is a mission statement. Ford's brief but powerful slogan "Quality is Job 1" could count as a mission statement. "We will be one amongst the top three transporters of goods and people in North
A mission statement can resemble a vision statement in a few companies, but that can be a grave mistake. It can confuse people. The vision statement can galvanize the people to achieve defined objectives, even if they are stretch objectives, provided the vision is SMART (Specific, Measurable, Achievable, Realistic and Timebound). A mission statement provides a path to realize the vision in line with its values. These statements have a direct bearing on the bottomline and success of the organization.
Features of an effective vision statement may include:
- Clarity and lack of ambiguity
- Paint a vivid and clear picture, not ambiguous
- Describing a bright future (hope)
- Memorable and engaging expression
- Realistic aspirations, achievable
- Alignment with organizational values and culture, Rational
- Time bound if it talks of achieving any goal or objective
In order to become really effective, an organizational vision statement must (the theory states) become assimilated into the organization's culture. Leaders have the responsibility of communicating the vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying the vision, creating short-term objectives compatible with the vision, and encouraging others to craft their own personal vision compatible with the organization's overall vision.
Why strategic plans fail
In general, strategic plans can fail for two types of reasons: inappropriate strategy and poor implementation.
Inappropriate strategies may arise due to:
- Poor market research or other information upon which the plan is founded
- Failure to define end states (objectives) correctly
- Incomplete SWOT analysis with respect to the desired end state(s)
- Lack of creativity in identifying possible strategies
- Strategies incapable of obtaining the desired objective
- Poor fit between the external environment and organizational resources - infeasibility
Poor implementation of a strategy may happen due to:
- Over-estimation of resources and abilities
- Under-estimation of time, personnel, or financial requirements
- Failure to coordinate
- Ineffective attempts to gain the support of others or resistance
- Failure to follow the plan
- Loss of senior management focus and continued sponsorship
References
- Bradford and Duncan, 'Simplified Strategic Planning' (Chandler House, 2000)
- Kono, T. (1994) Changing a company's strategy and culture. Long range planning, Volume: 27, Issue: 5 (October 1994), pp: 85-97
- P. Kotler, Megamarketing, Harvard Business Review (March--April 1986)
- J. Naisbitt, Megatrends: Ten New Directions Transforming our Lives (Macdonald, 1982)
- T. Levitt, Marketing myopia, Harvard Business Review (July--August 1960)
- L. Fahey and V. K. Narayman, Macroenvironmental Analysis for Strategic Management(West Publishing, 1986)
- R. F. Lusch and V. N. Lusch, Principles of Marketing (Kent Publishing, 1987)
